Gold drops to 2018 low as trade war fears boost Greenback

Gold is under pressure in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1275.69, down 0.22% on the day. Earlier in the day, gold dropped to $1270, its lowest level since December. On the release front, construction indicators were a mix. Building Permits dropped to 1.30 million, shy of the estimate of 1.35 million. This marked a 3-month low. Housing Starts improved to 1.35 million, beating the estimate of 1.31 million. On Wednesday, Federal Reserve Chair Jerome Powell will participate in a panel at the European Forum in Sintra, Portugal. The U.S will release Existing Home Sales.

In times of crisis, nervous investors often turn to gold, a safe-haven asset. However, since the start of the new round of tit-for tat tariffs between China and the U.S began on Friday, gold has defied expectations and lost ground. The base metal has declined 1.9% since Friday. The U.S dollar has posted broad gains against other major currencies and has also moved higher against gold.

President Trump has raised the stakes in the escalating trade spat between the world’s two largest economies. After China said it would match the U.S move to slap tariffs on $50 billion in Chinese goods, Trump sent shock waves across global markets on Tuesday, threatening to impose 10 percent tariffs on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate against this latest move. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. With the first of the U.S tariffs scheduled to take effect on July 6 and no signs that either side will blink first, there is a real danger of a global trade war, which could end up a lose-lose situation for both China and the United States.

XAU/USD Fundamentals

Tuesday (June 19)

8:30 US Building Permits. Estimate 1.35M. Actual 1.30M

8:30 US Housing Starts. Estimate 1.31M. Actual 1.35M

Wednesday (June 20)

6:00 British CBI Industrial Order Expectations. Estimate 1

8:30 US Current Account. Estimate -129B

9:30 Fed Chair Powell Speaks

10:00 US Existing Home Sales. Estimate 5.55M

*All release times are DST

*Key events are in bold

XAU/USD for Tuesday, June 19, 2018

XAU/USD June 18 at 12:35 DST

Open: 1278.36 High: 1284.10 Low: 1270.53 Close: 1274.96

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1220

1236

1260

1285

1307

13322

XAU/USD posted slight gains in the Asian sessions but then reversed directions and headed downwards in the European session. The pair has posted small gains in North American trade

1260 is providing support

1285 is the next resistance line

Current range: 1260 to 1285

Further levels in both directions:

Below: 1260, 1236, 1220 and 1204

Above: 1285, 1307, 1322 and 1337

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Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

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